Bank of Montreal (BMO) RBC Capital Markets Global Financial Institutions Conference 2025 summary

Tariff environment and risk management

• Ongoing monitoring and analysis of evolving tariff policies, with a focus on risk management and stress testing across affected industries such as manufacturing, automotive, and agriculture.

• Approximately 20% of Canadian GDP is estimated to be exposed to tariffs, with significant cross-border client activity and similar commercial book sizes in Canada and the U.S.

• Dual approach to exposure assessment: top-down stress testing and bottom-up client dialogue to identify unique risks and contingency plans.

• Clients are increasing liquidity, hedging, and in some cases diversifying manufacturing bases in response to tariff uncertainty.

• If tariffs persist, stress may manifest in higher provisions for credit losses (PCL) and a mild recession with rising unemployment is forecasted for Canada.

Credit outlook and provisions

• Provisions for credit losses peaked in Q4 and have since declined, with expectations to end the year closer to historical loss rates, excluding tariff impacts.

• A prolonged recession and higher unemployment could elevate credit losses, but impacts are expected to be in line with the broader Canadian banking sector.

• Exposure to tariffs is concentrated in manufacturing, automotive, and agriculture, with further disclosure planned as more data becomes available.

• Subsector analysis (e.g., automotive dealer loans vs. parts manufacturers) is ongoing to refine risk assessments.

Growth expectations and strategy

• Canadian operations have shown steady growth, outperforming U.S. operations, which have remained flat since the Silicon Valley Bank crisis.

• Anticipation of Canadian loan growth slowing if GDP declines under the tariff regime; U.S. loan growth expected to pick up in the second half of the year.

• Investment in sales force, particularly in California, aims to capture growth opportunities as conditions improve.